Independent Audit Advisory Committee

Taking up the wide-ranging reports of the Office of International Oversight Services (OIOS) and the Independent Audit Advisory Committee, delegates in the Fifth Committee (Administrative and Budgetary) this afternoon strongly supported the recent efforts and progress of those two crucial oversight bodies in strengthening the accountability and transparency of United Nations activities.

Delegates lauded the early success of the Under-Secretary-General for Internal Oversight Services, Carman Lapointe, who assumed her post a year ago, to fill long-vacant senior management posts and reduce the overall vacancy rate, as well as her initiative to increase transparency by posting audit reports on the OIOS website in 2012. Covering the 12-month period ending 30 June 2011, the annual report she introduced set out 1,702 recommendations to improve internal controls, accountability mechanisms and effectiveness throughout the United Nations.

The United States representative said his delegation hoped that the filling of OIOS leadership posts could result in a realignment on how investigations and audits were conducted in order to ferret out system weaknesses that could lead to fraud and corruption. He strongly supported the request for resources to support an Assistant-Secretary-General who would help the Under-Secretary-General manage the divisions and administrative and cross-cutting issues.

Norway’s representative said the United Nations must have zero tolerance for corruption, fraud and any misuse of funds, as well as set up and consistently use appropriate policies and mechanisms to prevent such acts. She was impressed by OIOS’ ambitious plans to increase its transparency and effectiveness, and its move to outline eight categories of priorities. She also backed the Office’s plans to reduce the number of reports and recommendations and focus its efforts on the most critical issues.

Several delegates supported OIOS’ efforts towards operational independence, but expressed concern over the low rate of implementing critical recommendations. Switzerland’s representative, who also spoke on behalf of Liechtenstein, encouraged the Office to refine the scope of operational independence, which was contingent on adequate funding for OIOS activities and appropriate reporting lines between it, the Secretary-General and Member States.

Argentina’s representative, speaking on behalf of the “Group of 77” developing countries and China, lauded Ms. Lapointe’s initiatives to better align work priorities with organizational risk. He also supported OIOS’ role in helping the Secretary-General fulfil his own internal oversight duties through internal audit, monitoring, inspection, evaluation and investigations. He encouraged OIOS to continue coordinating with the two other United Nations oversight entities — the Board of Auditors and Joint Inspection Unit — to avoid duplication of duties and to minimize gaps in oversight coverage.

Viet Nam’s representative said there was still room to improve the rate of implementing the Board of Auditors’ recommendations on peacekeeping operations. The large number of recommendations concerning logistics support possibly indicated a systemic problem that must be properly addressed. He also called on the management boards to pay more attention to OIOS recommendations on critical or high-risk management issues that had yet to be implemented and to interact more frequently with the oversight bodies.

The Committee also concluded its discussion on the scale of assessments, during which Mexico’s representative criticized the current methodology for not adequately reflecting Member States’ capacity to pay. She called for an in-depth review as soon as possible of all elements that could adjust the scale and generate a distortion in the calculation of one’s capacity to pay.

The representative of Singapore also made a statement on the internal oversight reports.

David Walker, Chair of the Independent Audit Advisory Committee, introduced the report on that body’s work for the 1 August 2010 to 31 July 2011 period.

The Committee will reconvene at 10 a.m. on Wednesday, 5 October, to take action on resolutions concerning the scale of assessments and begin its discussion of financial reports and audited financial statements and reports of the Board of Auditors, as well as of the proposed programme budget for the biennium 2012-2013.

Background

The Fifth Committee (Administrative and Budgetary) met today to conclude its debate on the scale of assessments for the apportionment of United Nations expenses. (See also Press Release GA/AB/3998) It was also expected to begin considering the report of the activities of the Office of Internal Oversight Services (OIOS), as well as its agenda item on the review of the efficiency of the Organization’s administration and financial functioning.

Before it was the report of the Office of Internal Oversight Services (OIOS) on its activities for the period from 1 July 2010 to 30 June 2011 (document A/66/286, Part I). Its three main sections cover initiatives aimed at improving OIOS functions, oversight results, its plans to strengthen the effectiveness and transparency of internal audit results and mandated reporting on oversight activities concerning the Capital Master Plan, the United Nations Compensation Commission and the construction of additional facilities at the United Nations Office at Nairobi and the Economic Commission for Africa (ECA).

The report excludes oversight activities of the Department of Peacekeeping Operations, Department of Field Support, or peacekeeping and special political missions, which will be presented to the General Assembly in Part II of the report during its current session.

During the reporting period, OIOS issued 323 oversight reports, including 7 reports to the Assembly and 65 closure reports. They included 1,702 recommendations to improve internal controls, accountability mechanisms and organizational efficiency and effectiveness, of which 398 were classified as critical to the Organization. The recommendations had financial implications of approximately $19.7 million. The financial implications of similar recommendations satisfactorily implemented during the period totalled some $2.6 million.

An addendum to the report (document A/66/286, Part I, Add.1) gives a detailed analysis of the status of implementing the recommendations and a breakdown of recommendations with financial implications. It highlights recommendations of greatest concern due to their lag in implementation and/or management’s failure to respond in a timely manner.

The addendum is divided into four main sections (II-V). Section II gives an overall assessment of the implementation of recommendations. Using a consolidated ageing table, section III provides a closer look at outstanding recommendations by entity, including, where applicable, separate comments on the recommendations of concern. Section IV includes a list of OIOS recommendations with financial implications in terms of future cost avoidance and unnecessary or excess expenditures or losses. Section V presents the list of oversight reports issued by OIOS between 1 July 2010 and 30 June 2011.

Of the 1,624 recommendations OIOS issued to United Nations entities during the period from 1 July 2010 to 31 May 2011, a total of 392, or 24 per cent, were deemed critical. As of 30 June 2011, programme managers had implemented 806, or half, of all recommendations issued between 1 July 2010 to 31 May 2011, and 165, or 42 per cent, of the critical recommendations issued during the same period.

Concerning the efficiency of the Organization’s administration and financial functioning, the Committee had before it the report of the Independent Audit Advisory Committee (document A/66/299) for the period 1 August 2010 to 31 July 2011, which gives an overview of that Committee’s activities, the status of its recommendations, its plans for 2011 and detailed comments, particularly concerning OIOS. According to that report, the Independent Audit Advisory Committee made 82 recommendations concerning internal oversight and accountability as of 30 June 2011, and considered it important for the Assembly to take them up during its sixty-sixth session.

In its detailed comments, the Audit Committee notes that most recommendations of the Board of Auditors were fully implemented after three years and that the rate of implementing recommendations on peacekeeping operations rose to 44 per cent for the 12-month financial period ending 30 June 2009, up from 40 per cent the previous period. Still, the Audit Committee cites room for improvement. It also states its intention to continue to follow up with OIOS audits on cross-cutting issues and OIOS’ new plan for monitoring and reporting on outstanding recommendations.

Regarding risk management and internal controls, the Audit Committee notes management’s progress in implementing, per resolution 64/259, an accountability system, including an accountability website. It reiterates all the recommendations listed in annex III of its report A/65/329, commends management’s steps to implement enterprise risk management, calls on senior leadership to successfully make that a high priority and reiterates the importance of creating a post of Chief Risk Officer to implement it system-wide.

The Audit Committee, expressing concern that the high vacancy rate in the Investigations Division could negatively impact pilot projects on investigations, said it would continue to monitor OIOS’ steps to fill those vacancies, especially the resident auditor and investigation posts. Lauding OIOS’ client satisfaction surveys as “steps in the right direction”, the Audit Committee suggests that OIOS aim to increase the satisfaction rate as well as take steps that demonstrate OIOS’ added value to the Organization. It also encourages OIOS to conduct external assessment reviews of its investigation, inspection and evaluation divisions.

Regarding assessed versus voluntary contributions to the United Nations, the Audit Committee states that relying on voluntary contributions for one quarter of its financing exposed the Organization to risks that the Administration should articulate and mitigate. The Committee also expresses concern over the ability to sustain such significant overall contribution increases given Member States’ fiscal challenges. Regarding performance audits, it says that any new audits by the Board of Auditors should not duplicate or overlap with existing OIOS audits.

The Secretary-General’s note transmitting the report of the Joint Inspection Unit (JIU) on the audit function in the United Nations system on its review of those functions (document A/66/73). According to the report, despite significant progress in the past decade, system-wide coherence and coordination among the Organization’s internal and external audit entities was still lacking and many bodies need to improve independence, capabilities, resources and processes to overcome performance gaps and to more closely meet stakeholders’ expectations. The report gives 18 major recommendations for enhancing efficiency and effectiveness, and identifies major challenges faced by internal audit and oversight heads and external auditors. It also lauds the recent creation of audit/oversight committees with an advisory role to management and legislative bodies as a major step to improving audit/oversight functions.

The Secretary-General’s note transmitting his comments and those of the United Nations System Chief Executive Board for Coordination on the JIU report (document A/66/73/Add.1) states that United Nations agencies has generally concurred with the JIU’s recommendations and that several of the recommendations are already in line with established practice. They note that agencies concurred with the recommendations to review the internal audit charter and financial rules and regulations pertaining to the internal audit function. They also agree that legislative and/or governing bodies should submit internal audit plans and resource requirements to senior management and the board for review and approval, but note that the definition of “board” is broad and should cover a wide range of public and private sector organizations.

While agreeing that audit plans should seek input from senior management but be prepared independently from it, agencies felt the annual planning process for internal audit functions should duly take into account the priorities of executive heads and senior management, according to the note. They believe that the proposal to consolidate all internal oversight functions into one unit works for some agencies, but it lacks justification in large, complex organizations.

Statements on Scale of Assessments

YANERIT MORGAN (Mexico) said relevant General Assembly decisions dictated that the Organization’s expenses should be spread among Member States according to their capacity to pay. The current methodology did not adequately reflect that concept. Even though Mexico had decided to join the consensus on the matter, its delegation believed the necessary in-depth review of the methodology to determine the scale of assessment was still pending.

Mexico reiterated the need to “review and scrutinize” all elements that could adjust the scale and generate a distortion in the calculation of the capacity to pay. As a middle-income country, Mexico was well aware that averages often hid realities. The application of the principle should not produce an onerous burden for countries that, while above the world average, still faced major challenges in poverty reduction and development. On the other hand, the methodology should reflect the evolution of each country’s capacities, she said. It was the Committee on Contribution’s responsibility to consider proposals that included the most timely, comprehensive and comparable information available. The Mexican delegation reiterated that all elements of the methodology should be subject to review, without preconceived ideas.

She recalled that in Assembly resolution 64/248, Member States decided “to review, at the earliest opportunity, all elements of the methodology of the scale of assessments with a view to a decision before the end of the sixty-sixth session, to take effect, if agreed, for the 2013-2015 scale period”. Mexico considered it necessary to begin an open and frank process of dialogue. An appropriate option would be to create a proposal for the membership to consider, on the format and schedule, beginning in January 2012, with a view to fulfil the mandate.

BERNARDO GREIVER, Chair of the Committee on Contributions, thanked Mexico’s representative as well as delegates that had spoken the day before for their useful and important remarks. Those remarks would be transmitted to the Committee of Contribution’s members for their review, and would be taken into account in its upcoming report.

Introduction of Reports

The Committee then began its consideration of the report on the activities of the Office of Internal Oversight Services (OIOS), as well as its agenda item on the review of the efficiency of the administration and financial functioning of the United Nations.

CARMAN LAPOINTE, Under-Secretary-General for Internal Oversight Services, introduced the OIOS report on its activities for the period from 1 July 2010 to 30 June 2011 (document A/66/286, Part I). She noted the growing momentum of the OIOS’ change management initiative and measurable progress towards the next phase. For example, the Office’s vacancy rate had fallen from 23 per cent in August 2010 to 17 per cent in August 2011. Ms. Lapointe said she was determined to lower that rate even further. OIOS also planned to make its audit reports publicly available on its website as of January 2012 in order to ensure timely responses to critical issues identified in oversight reports. Those reports would include specific action plans and management responses. OIOS would assign three ratings — “satisfactory”, “partially satisfactory” and “unsatisfactory” — to overall internal audit opinions at the audit engagement level.

She said that OIOS was also in the process of reviewing all open recommendations in order to reduce them to a more manageable number and enable management and OIOS alike to focus on the most important areas of concern. OIOS would forward to the Secretary-General all unaccepted, important and critical recommendations to ensure acceptance of residual risks. The OIOS reporting cycle to Member States would be streamlined. Beginning next year, the Office would simultaneously issue its annual report on peacekeeping and its annual report on non-peacekeeping operations, instead of issuing them on separate schedules, as it had in the past. That new approach would enhance the efficiency of the process used to report on and monitor recommendations and provide related accountability statistics for senior managers’ compacts.

Continuing, she said that OIOS had taken several other initiatives to strengthen its overall work, such as aligning priorities with organizational risks, she said. To accomplish that, it had updated audit risk assessments to factor in the effectiveness of existing key controls; developed a toolkit for auditing programme performance management; strengthened internal work processes and systems by installing customized electronic documentation and management software; and set up a digital forensic unit in New York within the Investigations Division.

“The report before you highlights only a fraction of the work that was completed during the period, but I can assure you that the last year has indeed been a very busy one for OIOS,” she said. OIOS had issued a total of 323 reports. In paragraphs 32 to 63 of the report presented today, it had highlighted the work of the Internal Audit Division, the Inspection and Evaluation Division and the Investigation Division.

DAVID WALKER, Chair of the Independent Audit Advisory Committee, introduced the report on that body’s work for the 1 August 2010 to 31 July 2011 period (document A/66/299). The report also outlined the Audit Committee’s plans for 2012, which included a preliminary work programme based on its responsibilities, the United Nations budget cycle and the scheduling of the sessions of the General Assembly, the Advisory Committee on Administrative and Budgetary Questions (ACABQ) and the Board of Auditors.

He highlighted several issues, including an improvement in the rate of implementation of oversight body recommendations, which he called “a step in the right direction”. But to translate that improvement into accountability, the Audit Committee believed that what was needed were high-quality recommendations that added value and were implemented in a timely manner. In that regard, the Audit Committee planned to carefully study a new OIOS initiative regarding the treatment of recommendations issued to management. The Audit Committee also believed greater efforts were needed to lay the ground work for an enterprise risk management (ERM) system. “[A]n organization of the size, complexity and importance of the United Nations should not be without a robust ERM framework steered from the highest level of the organization,” he said.

The Audit Committee recommended that management should spell out and mitigate the risks associated with the growing levels of voluntary contributions as a percentage of the overall resources of the Organization. Regarding the high OIOS vacancy rate, he said the Audit Committee was pleased that the body’s overall vacancy rate had declined since three key senior leadership positions had been filled. But the pilot project on investigations could be impacted by the high vacancy rate in the Investigation Division. He also was concerned with two recent opinions from the Office of Legal Affairs, one regarded the OIOS audit authority over funds and programmes, while a second regarded whether two members of the Audit Committee, who had received initial four-year terms, could be reappointed to respective three-year terms.

Finally, he said the terms of two Audit Committee members — his own position and the slot held by Vice-Chair John Muwanga — would expire at year’s end. He had advised the Secretary-General and other appropriate parties earlier in 2011 that he would not seek reappointment after serving during the first four years of the Committee’s existence.

Statements

SEBASTIÁN DI LUCA (Argentina), speaking on behalf of the “Group of 77” developing countries and China, noted OIOS’ various tasks and recommendations during the reporting period aimed at cost savings, recovery of overpayments, efficiency gains and other improvements to ensure risks were managed consistently and systematically through focused control processes. He reiterated his support for OIOS’ operational independence within the context of Assembly resolution 48/218 B, and its role in helping the Secretary-General with his oversight duties of resources and staff through internal audit, monitoring, inspection, evaluation and investigations. He encouraged OIOS to continue to regularly coordinate and consult with the Board of Auditors and the Joint Inspection Unit (JIU) to help avoid overlap or duplication of duties and to minimize gaps in oversight coverage.

He noted the ongoing internal efforts and initiatives aimed at strengthening OIOS functions to improve the alignment of work priorities with organizational risks; innovations in oversight processes and methodologies; strengthening of internal work processes and systems; and cultivation of a professional workforce. During informal consultations on the report, he would seek specific clarification of some of the new initiatives. He lauded United Nations entities that had implemented OIOS recommendations in a timely manner during the reporting period, but expressed concern over the apparent increase in the number of unaccepted recommendations, as well as the lower implementation rates, including for a greater number of critical proposals.

He urged OIOS to continue engaging closely with the Secretariat and other United Nations entities to facilitate implementation of its recommendations and to resolve differences before they surfaced within the wider United Nations system or Assembly debates. He would seek clarification on how the proposed changes introduced by OIOS fit within existing or pending Assembly decisions and/or mandates.

He looked forward to the timely receipt of pending reports on the construction of office facilities at the United Nations Office at Nairobi and at the Economic Commission for Africa (ECA), as well as to discussing OIOS’ key findings in the context of relevant agenda items. He lauded OIOS progress in filling vacancies, but remained concerned that it faced continuing difficulties in reaching optimum staffing levels, particularly in the Investigation and Internal Audit Divisions, especially in the hubs. He reiterated the urgent need to fill all vacant OIOS posts, with special attention to equitable gender and geographical distribution.

MATTHIAS DETTLING (Switzerland), also speaking on behalf of Liechtenstein, lauded the further improvements to OIOS’ risk methodology, in accordance with recommendations of the Audit Committee, and expressed hope that a risk-based approach would be successfully implemented in the area of investigations in the future. The current and previous annual OIOS reports revealed that the Secretariat’s risk landscape had constantly changed, but they did not show how risk categories had evolved over time. He asked for such an analysis in future annual OIOS reports. While OIOS’ progress in risk management was encouraging, risk-based audits were contingent upon the creation and rapid implementation of a solid enterprise risk management framework in the entire United Nations. He encouraged the Secretary-General to continue to enhance the Secretariat’s capabilities for risk assessment, mitigation and internal control. He commended Ms. Lapointe for her progress in reducing OIOS’ vacancy rate and in filling all division head positions for the first time in many years.

He noted the proposals in the OIOS annual report to change the rating system for audit reports and to reclassify recommendations, as part of wider efforts to clarify key oversight terms, in which the notion of “operational independence” played a central role. That notion was closely related to adequate funding arrangements for OIOS activities and appropriate reporting lines between OIOS, the Secretary-General and Member States, among other issues discussed in the annual report. He expressed hope that the Audit Committee and OIOS would succeed in further refining the scope of operational independence with a view to mutually reinforcing the roles and responsibilities of all stakeholders involved.

DIANA LEE (Singapore) congratulated OIOS on its progress in reducing the number of vacancies, particularly in leadership positions. Singapore shared the concerns of the Group of 77 and the Independent Audit Advisory Committee that the sustained high vacancy rate in the Investigations Division would impact that division’s substantive achievements. She encouraged OIOS and management to keep working closely together to reach a better implementation rate for the recommendations of OIOS.

Singapore also appreciated the efforts of the Audit Committee, which had consistently provided the Assembly with useful insights on how OIOS could improve its work. The reports before the Fifth Committee reinforced Singapore’s belief that the United Nations should uphold the separate and distinct roles of internal and external oversight mechanisms. The various United Nations oversight bodies, including OIOS, the Board of Auditors, the Audit Committee and the Joint Inspection Unit, complemented one another. They were a mutually reinforcing framework that provided a superstructure on which a more efficient and stronger organization could be built, she said.

STEPHEN LIEBERMAN (United States) said the work of OIOS was critically important to the ongoing viability and effectiveness of the United Nations. OIOS would continue to play an important role in enhancing the transparency, accountability and effectiveness of the United Nations by exercising appropriate internal oversight, promoting responsible use of resources and identifying and reporting instances of waste, fraud and mismanagement. The United States commended Ms. Lapointe for her work over the past year, including the filling of long vacant senior management positions, reducing the overall vacancy rate and her initiative to increase transparency by posting audit reports on the OIOS website in 2012.

The United States had long been concerned about the investigative capacity of OIOS since the termination of the Procurement Task Force in 2008. It hoped that the filling of leadership positions could lead to a realignment on how investigations and audits were conducted in order to ferret out system weaknesses that could lead to fraud and corruption. It strongly supported the request for resources to support an Assistant-Secretary-General who would help the Under-Secretary-General manage the divisions, and administrative and crosscutting issues.

There was still a need to resolve funding arrangements for OIOS, which needed to maintain its operational independence while fulfilling its mandates, he said. The United States agreed with an Audit Committee recommendation to ask the Secretary-General to present a proposal on that issue, as requested previously by the Assembly. The United States looked forward to receiving such a proposal during the sixty-sixth Assembly session.

Ms. MØLESTAD (Norway) said OIOS had played a critical role in the independent oversight of the United Nations. That oversight was linked to the legitimacy of the United Nations as a whole. It was crucial that the Organization had zero tolerance for corruption, fraud and any misuse of funds. The United Nations should have appropriate policies and mechanisms in place and they should be used consistently.

Norway was impressed by the ambitious plans to increase the transparency and effectiveness of the Office’s activities, she said. The outline of eight categories of priorities was very promising under the leadership of Ms. Lapointe. Norway praised OIOS’ efforts to place its internal audit reports on its website. The oversight results referred to in the report showed the value of the risk-based approach. Norway also supported OIOS’ plans to reduce the number of reports and recommendations and focus its efforts on the most critical issues. Norway was pleased that important vacancies had been filled and said it was very important that the high vacancy rate issue be solved.

NGUYEN HAI (Viet Nam) strongly endorsed the statement by Argentina on behalf of the Group of 77. He commended the work by the Audit Committee and its follow-up on implementation. In that regard, he agreed with the schedule of that Committee’s 2012 session and activities as they focused on important topics that would help improve the quality of the respective United Nations bodies’ work, enhance cooperation and coordination among them, as well as the accountability and responsibility of United Nations management levels. Management should consider and implement oversight bodies’ recommendations in a timely way in order to enhance efficiency, effectiveness and accountability in the entire United Nations system. But there was still room to improve the rate of implementing the Board of Auditors’ recommendations on peacekeeping operations. Timely implementation was essential to increase the level of accountability.

The high number of recommendations in the area of logistics support could indicate a systemic issue that must be properly addressed, he said. To have a good, strong accountability system in the Secretariat, the management board must pay greater attention to OIOS recommendations on critical or high risk management issues that had not been implemented. In addition, the management Board must interact more often with the oversight bodies. The Organization’s oversight work must be conducted in such a way that it got United Nations staff to meet high standards of ethics, fairness, transparency and accountability, high performance and managerial excellence. That meant that decisions on that issue demanded “business-like and careful” consideration by Member States.

Responses

Ms. LAPOINTE said it was clear from the comments that Member States were interested in the mandates of the Office of Internal Oversight Services (OIOS), and she looked forward to discussions and imagined the difficult questions would emerge during the informal sessions.

Mr. WALKER said he had not heard any specific questions regarding the Audit Committee and was confident that questions would emerge during the informal sessions.

Fifth Committee Chair TOMMO MONTHE (Cameroon) asked Mr. Walker what conclusions he could draw after his four years of service and if the Audit Committee was up-to-date with its proposals and programmes. He asked whether the crisis in the United Nations “oil—for-food” programme could happen again.

Mr. WALKER said there was no question that since the oversight body’s creation four years ago, there had been significant improvement in many areas. There was a more constructive relationship between management and the Organization’s oversight functions. There were many areas that held opportunities for attention and the job would never be done. “There is no such thing as zero risk,” he added, “there is always work to do.”

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